When I first moved to Calgary to work in the oil and gas industry in early 2006, it was right around the top of the property boom, and affordable housing was next to impossible to find. Not wanting to shell out half my salary for an apartment, and spending months to fill it up with furniture, I decided to go the room rental route.
Little did we know at the time, but towards the end of 2006, the market was slowly but surely moving from sellers’ to one that favoured buyers. Ones in the know, i.e. people with family members that dabbled in real estate, already sold in late 2005 or early 2006. But the media and the rest of us general public have always been slow to catch on. And you wouldn’t know, from the construction buzz around the city, to the countless “For Help” signs hanging haplessly outside shop windows, to stories of McDonald’s and Starbucks paying upward of $14 an hour plus benefits to attract and retain employees.
My second landlord, a sweet spinster in her 60s, believed in the power of real estate as much as she believed in the miracle that is modern medicine. She credited her various real estate investments for her comfortable lifestyle, despite not having worked out of her home for more than decade. Her piece of advice to any young-uns that cross her path, is the adage that we should all invest in real estate sooner rather than later. I can’t blame her or others her generation for their spectacular confidence in the strength of the housing market. Their experience of ever-rising property prices facilitated that expectation. It certainly looked good at the time, with housing prices that doubled within a few years. Houses that were hardly 1,000 square feet would go for 400,000 to 500,000 dollars in certain parts of the city. The gains were ludicrous. And the whole town was drunk on the sudden discovery that, thanks to oil sands in their back yards, a lot of them were paper millionaires! Read more...
A couple of days ago, a fellow blogger commented on this rather unfortunate Fortune article on his blog. It is interesting for several reasons.
First, the ideas are cookie-cutter and stale. Us Gen Yers had been told (to a certain extent) that we were on the cusp of a great demographic shift, where baby boomers’ impending departure would wreak havoc on corporate health. True, some of us were led to believe that our contribution would be valued at a premium, which would in turn translate into lots of choices and result in us hopping through the corporate environment at break-neck speed. In reality? Highly unlikely. The smart ones among us always knew that good jobs are competitive, and supply almost always outstrip demand, especially at the bottom rung. But the media kept up the propaganda – to what end, I don’t know. Every once in a while, articles like this appear.
Second, the timing is totally off. Because of economic realities, many boomers simply can’t afford to retire. More and more Gen Yers find themselves in a much more competitive environment than they were led to believe. Now everybody is learning to make do with less and to compromise. Exactly who is out pandering to those misunderstood geniuses, I’m not sure.
The somewhat hilarious prescriptions thrown around by the Fortune writer, and the kick my blogger friend got out of it, reminds me of a book I heard about recently. In this book, the authors address the various social and consumerist constructions of the Gen Y generation. I took some notes, here’s a broad overview of the ideas.
School: the obsession with feeling good at all cost
According to the book, the ME culture evolved over several decades, but found its decisive start within the school system. The baby boomer generation struck out, rejected authority and tried to find its own path. In their children, they instituted and obsessed over instilling self-esteem. Subsequently, various forms of formal, or informal self-esteem programs were introduced in school. They generally aim to make children feel good about themselves at all times and at all cost, with messages like: you are special, you are unique, you are fine just the way you are. Read more...
A while ago, I looked at some of the worst-hit countries from the global financial storm, and concluded that on a scale of bad to deplorable, the US hardly the worst off. No crystal ball can readily foretell which regions will emerge from the crisis unscathed, but I am bullish on Canada in the medium to long term. Here’s why.
Sounds banks, no bailouts
Some say it was the far-sightedness, wisdom and conservatism that prevented the Canadian banks from participating in the madness that was the sub-prime securitization in the US. Many European banks were not so lucky. Financial institutions from Ireland, England, Iceland, to Belgium and Germany bit off more than they could chew from the “financial innovation” engineered by geeky American capitalists.
In actual fact, it was more likely that the one should credit the particularly Canadian combination of inertia, combined with a dose of cynicism and natural repulsion reserved for those overwhelmingly dominant American business machines, for saving taxpayers from burdens now haunting citizens the world over.
In 2009, the World Economic Forum announced that Canada has the soundest banking system in the world. No small feat, given both the US and many of Europe’s finest had put out their hands to respective governments for help. More embarrassingly, IMF bail-outs and their subsequent belt-tightening policies – previously a last-resort set up to help the undisciplined and “underdeveloped” countries of the world, are forced-fed to some that basked in prosperity only a year ago.
Still sustainable health care, and education system
Rosy picture aside, Canada is hardly immune from the global downturn. In 2008, even perennial winners and long-time economic powerhouses – such as Ontario and Alberta, reported deficits. In a bittersweet historical moment, Ontario got its first ever federal equalization payment this month. Bitter, because the check is usually reserved for Canada’s poorest (have-not) provinces. Sweet, because, well, Ontario cannot complain from never getting anything out of the federal government again.
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This is the first real recession for many of us. Some are dealing with the uncertainties by crying foul and uploading blames to all the wrong sources, others are blithely unaware of the seismic shifts taking place right under our noses. Which ones of those trends are long-lasting, and which are merely temporary?
Flirting with frugality
For months, the media has been obsessive in its coverage of America’s new favourite past-time: extreme frugality. It’s one thing to have a subculture of cheapskates planning to save another ten bucks a week in some dark corner of the blogosphere (I know because I am one of those). But it’s entirely another matter to have the Wall Street Journal persuading me from buying a bottle of Evian, so I can save a buck.
With countless individuals and families dealing with foreclosure, many grappling with unemployment, and the millions suffering in silence from a vast amount of their wealth wiped out from a drop in housing prices and stock portfolios, some say that a focus on savings may not be an entirely terrible pursuit.
Certainly, if you are head over heels in debt, and threatened by lay-offs and a drastic change in income, then lifestyle changes must follow. Some consumers are so shell-shocked over the drastic drop in their perceived wealth that they may never recover to join the consumerist party again.
Indeed, America may move away from its previously rampantly materialistic culture of years past to become a more moderate consumerist group. On second thought, I’m not sure I can even believe that. The American Dream of rags to riches will not die. The passionate measures that some Americans have taken to protect and preserve their wealth (of which frugality is a tactic) can only accentuates, instead of diminishing the very American practice of linking success to material possessions. The pursuit of wealth and subsequent accumulation of wealth may be temporarily halted, but centuries of ideals and beliefs do not get erased from the collective psyche just like that. Read more...
Don Coxe is an investment strategist. But unlike most investment strategists that flaunt degrees in mathematics or quantum physics, Coxe is a curious historian. At 73, his curiosity has yet to wane, and his quarterly newsletter Basic Points has followed him from his old employer BMO to his new investment advisory business.
He makes investment a fun pursuit, not only of numbers, but of knowledge. In his own word, he studies history to “compare popular views about economics, finance, geopolitics with evidence of what has happened in various eras.” And making money is merely a financially rewarding byproduct of that pursuit.
In his March edition of Basic Points, Coxe drew my attention to a few points rarely discussed by investment advisors and analysts in the mainstream. Let’s see what they are.
Lack of sunspot activities and possible crop failures
Most of us are aware that the earth has been warming up in the last couple of centuries. The rise of environmentalism makes sure of that, and Gore’s Inconvenient Truth enforces that belief. As humans, we are no doubt responsible for the unprecedented level of pollution and degradation to our natural habitats. But the feverish pitch of the environmentalists has become dogmatic in recent years, and any dissent over either methodology or the validity of data that supports their belief is deemed treasonous.
As much as environmental awareness is a more than commendable cause, the sensationalism and the selectivity over the type of news and data that make it to the front page has been astounding. Bloopers are swept into the background, and wildly pessimistic and sensationalistic pieces inject more fear and exaggerated claims into mainstream conversations. We are all for a better living environment, but no end justifies the means if facts and truths are misrepresented in the process. The public will turn their backs on the cause, no matter how noble it may be. Read more...
This is part two of a two part post on the importance of demographics on one’s investment choices. Part one addresses the perils of neglecting demographics, and today’s post will discuss investment ideas backed up by demographic trends.
The more sensible consumer mentality may also be applied to investments. For years, we have invested in trends that most people do not understand – many had little fundamental support behind it other than the sheer force of market momentum. The foolishness of that collective decision is reflected in overall market returns: during the past decade, the stock market has not treated us well.
Perhaps it’s time to look at investments that have the solid support of demographics and real demand behind it? Is it any surprise that during this crisis, Best Buy is down 47% and Family Dollar Stores are up 30%? Before the fundamental disarrays of the economy are addressed, it’s safe to say that products and services that meet essential needs will stick around. On a side note, would it also make a lot of sense to retrain those laid-off workers from the previous fluff economy in those fields that have long-term demands? Now going back to the idea of ongoing demands, here are some thoughts.
Follow the demands of the aging population and pay attention to healthcare related companies not run by crooks. In most of the developed countries, healthcare needs are hardly abating. The demands for various levels of medical care in the forms of doctors, nurses, medication, medical equipments, and assisted living will continue to rise every year. Yet the broken Medicare system in the US, along with issues of patents, the emergence of scandals and ethics quandaries related to the pharmaceutical industries, have tainted the industry reputation and sidetracked the dire issue on hand. But with pressing demands that will continue rising with time, it is an industry that demographers would pay close attention to.
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This is a two-part article that addresses economic and investment implications of demographic trends. Today, I look at what happens when we ignore demographics. In tomorrow’s column, I look at some investment opportunities supported by population and demand trends.
I still remember presenting David Foot’s book “Boom, Bust, and Echo” in my high school economics class. It was the first time I was exposed to the idea. It was clear, succinct, and for me, absolutely mind-blowing (I was 17, ok?). Its sociological, marketing, economic and political implications kept me engaged and excited for weeks leading up to my talk. I still remember feeling exasperated at not being able to present the explanatory power of this concept within an hour of allotted time. This was before Powerpoint came along to provide structural assistance and graphics entertainment. So God bless my fellow classmates for sitting through the hour of what must’ve been an excruciatingly boring experience: me, with questionable level of articulateness, wildly gesticulating with my right hand, while waving pages of notes with my left.
It’s been a while since high school, and the over-use and abuse of the term has since left me disillusioned with its clairvoyance. The rest of the world must have discovered the magical potential of a concept that is always readily available to provide digestible explanations for, well, everything.
When I worked in the oil boom town of Calgary in western Canada, any high school drop-out rig worker or administrative assistant, when asked about the sustainability of sky-rocket crude prices, would shrug their shoulders and say: it’s China and India, they need oil, it’s all about demographics. The same line of reasoning was used to explain the rise of food prices last year: developing countries are getting richer and eating better, there’s an increase in demand, again, it’s demographics. The same explanation sufficed for the bio-tech and pharmaceutical stock rally every few years: the baby boomers, they’re getting older and need medication, it’s demographics! Read more...
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